As widely reported this week, the EPA has passed a long anticipated set of rules regulating the emission of mercury and other pollutants from cement plants. Reactions have been predictable: dire predictions that the regulations “can’t be met” with existing technologies for certain plants and claims of the billions of dollars the new regulations will cost the industry.
Industry spokespersons would be wise to study the historical statements of those who have come before them, such as the US automakers in 1972 fighting against catalytic converters. GM’s Earnest Starkman famously claimed that introducing converters on 1975 model cars could result in “complete stoppage of the entire production”…”obvious tremendous loss to the company, shareholders, employees, supplier and communities.” Local Allentown hero Lee Iacocca, then head of Ford, went even farther, claiming that the rule would cause Ford to shut down and result in a reduction to the GNP of $17 billion and the collapse of some local governments. Well, automakers may be dying today but it certainly wasn’t catalytic converters that killed them, nor did they cause the collapse of society.
There will, in fact, be tremendous cost to the industry and this should be considered in the context of a current weak U.S. economy. Catalytic converters did not come for free (although they initially cost about one third of the projections given by the industry), and neither will reducing mercury and other pollutants from cement plants. The significant difference here is that the catalytic converter regulations applied to all cars brought into the United States, making a level playing field. This is not the case for cement! As a fungible commodity, cement can be imported theoretically from anywhere (at a cost) including from sources where no emissions regulations apply. This is the ”missing link” from the EPA-imposed regulations: the topic of harm/compensation should be used to minimize the impact on sectors, such as cement, that are exposed to “leakage” from other parts of the world. The industry should be fighting for a “Mercury tax” on imported cement. This is not protectionism, it is simply making an economic adjustment for the projected environmental cost of higher mercury emissions. These “taxes” should then fund R&D activities to reduce emissions even further and to drive costs down through economies of scale. Under this scenario, importers could choose to meet the same requirements and avoid the tariffs (or have them imposed by their own governments), but in the meantime US companies would do well to focus their efforts on reducing mercury emissions at the lowest possible cost.
Alas, this approach may not find many allies in the industry because most cement producers are multi-national and have the option of importing cement from their non-US facilities. The multi-nationals are not inclined to support taxes against themselves to protect higher cost production in the US. Still this the type of visionary leadership that is needed because the cost of mercury emissions is not currently reflected in the cost of U.S. cement. It is treated as an “externality” and, therefore, the economics do not reflect the realities.
This is a watershed moment. Mercury and the other pollutants covered by these new regulations are the latest, perhaps largest, but certainly not the last emissions challenges that will be faced by the US cement industry. How the industry chooses to meet these challenges will define the next era.